Paying Off Debt With Windfall Money

As much as I would love to go and blow this, what I would love EVEN more, is to knock out my debt with it. So here’s the breakdown on what I did with this baby:

Pay Off Debt

I took $4,000 if it and applied it directly to my student loan debt. The balance remaining on my student loan yesterday was $24,653.00. Now it’s a much more sexy $20,653.00! That’s a 16% decrease in student loan debt, or approximately 7 months worth of accelerated payments. I’m practically salivating just looking at these numbers. This also knocks my total debt down from $35,001 to $31,001. That’s an 11% decrease! Another way of looking at it is this: I’ve cleared out almost $7,000 of debt principle since October 30th, 2011. Not bad.

Save Money for My Wedding Fund

I had decided to put a portion of this large income tax refund into my wedding fund as a cushion in case I had to tap and then replenish my emergency fund. So $1,000.00 went into my ING High Interest Savings Account that is designated for all things wedding related. My goal budget for my wedding is $7,000. So I am currently 14% of the way to achieving this goal. Woohoo for progress!

The Extras

I decided to keep the $443.79 as personal play money. But rather than spend it, I’m saving it for something else. As I mentioned earlier I really, really want to get a dog. So that $400ish bucks is going to form the basis of my doggy savings account.

The Mental Implications

While picking away at my debt week by week with my little extra payments is all well and good, I must admit, sometimes I get frustrated with the seeming lack of progress that I’ve made against it. Sometimes I feel that I am really depriving myself, and for what? The debt load doesn’t even appear to be moving very much. Sure it decreases at a steady rate, but the progress seems painfully slow considering how fatigued I’ve felt lately from counting every single last penny, and constantly saying no to the things that I want.

This lump sum payment that I’ve been able to put on my debt is a real shot in the arm that I’ve been needing. I needed to feel like I was making some kind of progress. Like this debt repayment schedule isn’t going to just go on and on forever.

One of the pieces of advice that I’ve read about getting out of debt is to throw all windfall money at your debt. This includes tax returns, inheritances, lottery winnings (ha!), you name it. If you weren’t expecting it, use it to pay off a chunk of your debt. Now I’m really understanding how helpful this advice is, and how important it is to keep your eye on your goals. My goal of debt freedom is a little bit closer today, and I’m now prepared to attack it with renewed energy. I can do this!

I recently got my tax refund back too. Sadly it was only about $1,000 (but better than owing) and I split $500 towards my car loan, $125 into savings and $125 into my Roth IRA. The rest I'm using as spending money.

This month I've had the same feeling as you concerning the debt repayment. It seems like it's taking forever and my payment don't seem to add up to much. I finally had to tell myself that making SOME progress is better than NONE. You are more than your debt!